Court Affirms Arizona's Use of Mortgage Settlement to Balance Budget

Most was for direct aid to homeowners to help reduce their mortgages. There also was cash compensation for those who already had lost their homes.

September 25, 2013

Legislators did nothing wrong in seizing $50 million from the state’s share of a nationwide mortgage fraud settlement to balance the budget, the Arizona Supreme Court ruled Tuesday.

Without comment, the justices upheld lower-court rulings that nothing in the agreement signed by Attorney General Tom Horne required him to spend the money only on services that benefit homeowners, including those in danger of foreclosure.

The justices also formally gave the go-ahead for the transfer of the cash, which had been on hold while the case made its way through the legal system.

Attorney Tim Hogan of the Arizona Center for Law in the Public Interest, who sued to block the move, called Tuesday’s ruling “unfortunate.”

“There’s still a ton of people that could have benefited from this money that rightfully should have been spent on people with foreclosure problems instead of going to the general fund,” he said.

And Hogan said the irony ﻿is that lawmakers, in demanding the cash last year, insisted they needed it to balance the budget. But by the time the fiscal year ended on June 30, the state had a surplus of nearly $900 million.

The dispute stems from last year’s $26 billion nationwide settlement with five major mortgage lenders accused of fraud.

Arizona’s share of that was $1.6 billion. Most was for direct aid to homeowners to help reduce their mortgages. There also was cash compensation for those who already had lost their homes.